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Senate Passes Bill to Restrict Credit Card Rate Hikes
Congress is trying to put a stop to unfair interest rate hikes and unexpected fees that credit card companies often throw at customers.
"The interest keeps growing on all the old debt and so it's really difficult to pay it all off," said Zak Sharif of Etters.
Sharif plays credit card roulette. He transfers balances, though getting rid of debt is an uphill battle; one that so many others are fighting.
"Quite honestly, the American consumer is in a lot of pain," said FMA financial advisor Dave Rinehart.
Lawmakers are trying to give Americans struggling to pay their bills a bit more breathing room. The Senate overwhelmingly passed a bill that cracks down on credit card companies.
Credit card companies won't be able to increase interest rates without giving consumers a 45 day notice. Credit companies can't raise rates until customers' payments are 60 days late. Plus, there will be no rate hikes on new cards for a year.
If you're under 21, you'll need your parents' approval or proof of a job to open an account.
"That's quite reasonable, having gotten credit cards when I was way too young," said Sharif. "That makes sense."
Though bankers warn the measure restricts credit at a time when Americans need it most, creditors may very well be doing more homework before lending.
"Overall, it should help the amount of defaults in the future and we can hopefully avoid some of the issues that got us into this mess," Rinehart said.
With rate hike restrictions, where will credit card companies turn to make up for lost revenue?
"Riskier borrowers pay more for loans just like riskier drivers pay more for car insurance, and that inability to price for risk means that cost is spread out over everybody," said Nessa Feddis, with the American Bankers Association.
The so-called Credit Card Bill of Rights is expected to pass the House with ease. President Obama says he wants to sign it into law by Memorial Day. After that, credit card companies will have nine months to make changes.
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